Commodities - Flip 'em off

Today we have a 6 property crafting plan. These little packages are worth quite a bit. See how much I sold this (and a couple more things) for after the jump.

Update: The second part of this post is here. The final part is here.

There's a funny story about how this dropped.

High Heels

I was clearing Stonefort in Act 3 as a precursor for doing a Cydaea run. Usually, I'll clear Stonefort first to get a couple of stacks to ensure that I have 5 as I hit Cydaea. There is only a guarantee of one rare mob per floor of the Sin Heart areas, which means that bad luck could leave me stuck in front of Cydaea with 2 stacks, and I would have to TP out and find 3 mobs to kill. (In case you are wondering my build, it is briefly discussed here.)

My runs usually start with Cydaea -> Azmodan -> Clear rest of the act until everything is dead or I get bored. The reason for this is convenience: I'm not forced to clear the game sequentially, so I can stop playing whenever my gf tells me to something comes up, instead of forcing myself to play until Azmodan is dead. I can also skip parts of the game that spawn with difficult champions, so I don't get annoyed. It's a game after all; there's no reason to get angry for no reason.

Anyways, here I am at Stonefort. I pick Stonefort as the pre-run area because there's Winged Moloks and Shamans to warm me up before I really start playing. I really dislike dying during the run (who doesn't), and this part also serves as a time for my PC to buffer game assets into my memory so it doesn't lag when I start playing.

Now, I haven't played in a couple of days... I've been sick, had to catch up on work, and also got in some Olympics-viewing action (this is possibly the first time I'm glad that I actually pay for cable TV). So naturally, Diablo is going to be very choppy in the first couple of minutes; the PC isn't optimized for the game anymore.

And this is when I see something that startles me. As if a dark secret has been bestowed on me (and other players with slow PCs).

Let me show you what I mean. Take a look at image below.

The demon hunter has demons in his closet.

Ok. You're probably wondering what the big deal is. Well, take a look at the next picture:

My male Demon Hunter

Yeah. My Demon hunter is male (whom we named Derpio after our half-autistic-looking stuffed animal). Go back to the screencap of me vaulting:

Quality work, Blizzard

You saw it here first. When my Male Demon hunter goes into the shadow realm to execute his vault skill, he slips on a pair of high heels and grows a pair of ta-tas. Excellent work, Blizzard.

Flipping

Strangely erotic

Now that we've gone completely off topic, let's flip the subject back.

This article is about flipping.

What's flipping? It's the act of buying for cheap and selling for slightly less cheap. Buy low, sell high. It's where you stare at the auction house for hours, not playing the game at all, with the sole intent of making profits. Sounds fun right?

Okay, maybe not. Well, you don't need to do that to make a profit. In fact, it's usually just a waste of time if all you do is grind the AH. Think about it, you're spending real-life-time on this game: If you're just trying to squeeze out profits and not having fun, then you should stop playing. There's other ways to make effective money. You could write a crappy blog. I mean, the game is played on a machine that consumes electricity, and while you might not have to pay for it, someone else does. It's costing resources.

Takeaway: don't be this guy

Let's look at it from another angle: Every hour you're playing is one less hour you could be doing something actually constructive. Go on a bike ride, take a long run, build a birdhouse. You're paying for Diablo-time using your life and future. Those are important things. The biggest takeaway I got from my thousands of hours of gaming is to simply not put your life into it. It's not worth it in the end.

This is just something that gushed over from my exercise blog, but let me give you the biggest tip for dealing with stress in the shortest amount of time. It's not complicated. Just find a quiet place (like your bed), get on it, and do nothing for 3 minutes. Do it every day. 3 minutes isn't a long time in the grand scheme of things, but it'll seem like an eternity when you are doing nothing. Focus on nothing. If you can't do that easily, then imagine the infinity symbol ∞ and trace it over and over again with your mind.

 Why am I advocating this? What is the point? Well, this forces you to think about why you do things. People play games as a form of escapism. Some play games because it furthers their compulsive nature for completion or collecting. For some, it's the social aspect. Other times, it's boredom. For me it's a mix of the first two. If you can understand why you play Diablo, then you can avoid the trap of compulsively playing just for the sake of playing.

The reason I'm giving this speech is because grinding the AH is extremely profitable. I know a pair of guys that make hundreds of dollars a day, just grinding. They do it for the money. There is no fun in it at all besides the thrill of a good sale. I was like this in the past, but I moved on; I didn't think it's healthy at all. That's the reason for this public service announcement.

TL;DR: My goal with this post is to give you the right information to properly flip items. Not so you can geek out on the AH and look for profits all day long. Please keep this in mind.

Tools of the trade

Nobody will understand this reference

You need a couple of tools before you can actually beat the AH:

1. You should understand how good the item is. Not just that the item looks good, or that it has high rolls. You need an objective method to value certain affixes so you know exactly how much profit you stand to gain.
2. Gold/money, patience, and the proper mindset. Even if you sniped something at an absurdly low price, flipping still takes time and auction house slots.
3. You should understand how other people buy and sell on the AH. AH behavior is highly predictable; if you know how other players use the AH, then finding deals is simple.

How do we judge if an item is good? Well, remember this article? Go refresh yourself in case you've forgotten how to properly value affixes. That deals with issue #1.

For #2, you're really on your own. Imagine that you see a cheap item on the AH; should you buy it or leave it alone? You can clearly tell that the item is cheap and it's got some good rolls, but is it going to be worth your time to try and sell it? I can't make that decision for you.

Actually I can: Just buy it.

If your brain has already pushed you this far, then you should just buy it. Worst case scenario? You lose some fees when you resell it, and you get a learning experience. You are now more prepared for the future. If you never take these risks, then you'll never learn anything worth learning. The only time you shouldn't buy it is for the reasons I mentioned earlier: If you're saving your gold for something, or don't have time or the slots to resell it. So, if you're ever stuck, staring at a really good item on the AH that you feel can be sniped (and have read the rest of this post), take my advice and just buy it.

How about #3? Understanding player behavior is key to flipping. It's what we will talk about today. Let's go through some concrete tips you can use.

Deals, deals, everywhere

She's actually a shoplifter

What are some easy ways to look for deals on the AH? 

Price

Let's do the easy one first. If the buyout is cheap, then it's a good deal. Duh.

Easy, right? If you see a row of items in the tens of millions, and nestled in those items is one at 7 million, then a light bulb should go off in your head. Now, I'm not telling you to buy it on the spot. I'm just trying to say that looking for items with 1 less digit in the price is a fast way to scan for cheap items.

Disclaimer: This only makes sense if your search criterions are strong and specific. A crappy item is gonna be cheap, and you don't want that.

End time

Auctions last 36 hours. When you list an item, it will immediately show up as having 1 day 11 hours left to go (due to it's rounding). 

ding ding ding

 How can you use this to your advantage? Look for items with 1d 11h remaining, they have a much higher chance of being good deals. This is because it's a fresh item. You're looking at an item that has just recently been posted; all the other sharks haven't had a time to smell the blood yet, so now is your chance to make the initial decision on it's deal-worthiness.

Think about the logical inverse case: When have you found a good deal that has been sitting on the AH for a day? Not that often.

Bidding Auctions

I won this in a bidding auction for 10m.
Expect a future post on it.

I define bidding auctions as auctions where there's no buyout. This means that bidding is required. This is an easy place to find good deals (assuming you can snipe), because the starting price will generally be low, and there is no guarantee that someone else is on the other line trying to fight you. 

Think about it this way: When do you list auctions for bid-only?

I do it when I'm not really sure how much an item costs. I'm basically just throwing it up at a random price and hoping that a bidding war occurs. If I was a buyer, I would want to take advantage of the seller's lack of knowledge and go after his bidding auctions. Sometimes you'll be the only bidder and end up with a good deal, because the viewing traffic of bid-only auctions is much, much lower.

I won the Fire Walkers shown above with a single bid; there was no fighting at all. It's clearly not because these boots are bad; in fact, they are pretty damn amazing. I just believe that nobody else was looking at the right time.

Undervalued affixes

 There are affixes beside primary stats, sockets, LoH, and crit bonus damage that matter. I see weapons on the AH with Life Steal selling for prices like it didn't have LS at all. Remember the post where I attempted to estimate the value of Life Steal (here)? It's not a worthless affix.

The Reduced Level requirement affix is also rare and highly valuable (especially in Hardcore), but I see them mispriced all the time. If you purposely search for items with these affixes, you can usually score yourself a good deal.

The 90% Affix search

Search the AH for items with high affix rolls. If you read this article, then you know that rare boots can roll with a maximum value of 200 Intelligence. As you approach the maximum value, the price should increase dramatically. (The reason for this is also discussed in that post.)

Remember this? Rarity vs price curve

Some people do not realize this. They may quickly price a pair of 195 int boots against a pair of 180 int boots that they see on the AH, out of convenience. Because they don't realize that 200 is the max, then 195 is not that much different than a 180 to them. They assume they are working on the left side of the curve, when in reality, they are on the far right side of the curve.

I sniped these at 500k; worth quite a bit of Chipotle burritos

 Remember these boots from a previous post? Well, these are the perfect example of undervalued High Affixes. 189 int is a very high roll out of 200. 68 resists is a respectable roll out of 80. And 20% mf... well that's just a perfect roll. Are you wondering what I sold them for? I could tell you, but I think it's better if I just have you wait until the part 2 of this post comes out.

This category is how I find most of the flipping good deals. All you really have to know is the maximum value of the affix, and search for items that have 90% or more of the max affix value. I found Strider Insolence when I looked for [180+] Int, and [any] resist all.

As you develop more experience with a certain market, you can quickly do these 90% searches to find any obvious outliers and snap them up. Of course, if you can't throw around 10m gold easily, then you might want to stick with 80% searches; just remember that only the best items can command the best prices.

 Arbitrage

Be a middleman for fun and profit

Arbitrage. I played D2:LOD for years and participated in arbitrage for years before I realized there was actually a convenient term for it.

In Diablo 3, you are essentially arbitraging whenever you notice a market with a good "$:gold" ratio. Whenever you buy something for cheap on the GAH and sell it for a profit on the RMAH, you are arbitraging.

 Let me give an example.

When commodities were enabled for sale on the GAH, gold started at a very high $ value. I made quite a bit of sales of gold at 3$ per million, which was way higher than the going price. Of course, this subsided quickly. This post talks about it in more depth. By selling gold at 3$ per million, you are arbitraging profitably because of the difference in this market and what everyone else is willing to pay.

There was a second market that was also quite profitable: Crafting scrolls. I only realized this when I found the Exalted Grand Sovereign Mail crafting scroll. When I went to sell the thing on the GAH, I figured what the hell, let's see how much it goes for on the RMAH.

The last-sold price was a solid 24$! I was only planning to sell it on the GAH for 9m. This translates to a 2.67$ per million ratio, which is much better than the unofficial going rate. I threw it up on the RMAH right away and patted myself on the back for successful arbitrage.

But I wasn't done. When you see a good market, you exploit it. So I quickly wrote down the prices for other 6-property crafting recipes: 20$, 25$, 50$. Then I switched to the gold AH, and wrote down the prices for the same items in gold: 10m, 13m, whatever. I did some quick division to find the going rate, and subtracted 15% from the sale fee, and realized the Exalted Pallium was actually profitable.

(I made up numbers for ease of calculation)

Pallium on GAH: 10m

Pallium on RMAH: 25$

Unofficial price of buying 1m gold a friend: 2$ per million

I would buy Pallium recipes for 10m from the AH, then sell it for 25$ * (1-.15 fee) = 21.25$. Then, if I bought the gold back from my friend, I would end with 21.25$ * (1m gold / 2$) =  10.625m gold. This is a profit of (10.625 - 10) = 0.625 million.

Of course, we are talking about the past here. If this was still profitable, I would be milking it for all it's worth. I'm just trying to tell you how to effectively exploit differences between the GAH and RMAH: Be inquisitive, get your notepad out, and be ready to do the math. (There's more discussion on the $:gold ratio and arbitrage in an older post.)

Scroll down to see how much I ended up selling all this stuff for.

Click on the image to zoom in, or use the link below

 http://i.imgur.com/RN6O4.jp